Frugal Lifestyle Guide 1

Do You Need an Investment Advisor? Here’s What you need to Know.

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When it comes to creating wealth most people go the professional route – straight to the investment advisor. These people work to make your money grow without you lifting a finger. But it will cost you. Investment advisors take a hefty commission from your earnings and they may not be giving you the best advice for your money. If you ask them, they will undoubtedly tell you how difficult the financial world is to navigate but many people these days are taking the DIY approach instead.

Note: Investment advisors and planners do have slightly different jobs but the terms are mostly interchangeable. SEC guidelines has the specifics between the two.

Manage Your Money

A financial advisor isn’t just in charge of making investments, they’re also in charge of knowing where your money is, where it’s going, and having a strategy for making that work. The market and investments can be very complex so it’s nice to know that you have someone who does know what they’re doing managing your money for you. On the other hand, you’ll lose an estimate of 1% of your wealth by hiring them whether they help your money grow or not.

If you’re managing your money yourself you’ll be saving yourself that money and you’ll also have the final word about where your money is being invested or going. That’s not necessarily a good thing. If you’re unfamiliar with financial markets or don’t keep track of your investments you could end up losing money or investing unwisely. You might not allocate properly and you might risk being caught with hidden fees.

How Much?

The two biggest things to determine before you make any choices are how much money are you willing to invest and how much time. If you’re dealing with a complicated financial situation then it may be worth your time to have someone else manage it professionally. If you’re not dealing with much money then it may be easier, and cheaper to simply do it yourself. A small portfolio needs much less interaction but it’s also not going to give you big gains unless you work on investing it properly.

Another question to ask yourself is how much help do you need? As a beginner or someone who hasn’t had a lot of time to study the markets you may feel lost and in need of advice, while someone who has spent the time getting familiar with finance before investing may be comfortable on their own. The FINRA has a lot of useful tools for doing that. Your level of understanding within the financial markets will make a big difference to your success.

And, speaking of success, how much do you plan to make? If you know you’re going big then maybe some advice is a good idea, but if you’re looking to dabble you can probably get away with doing it yourself.

Consultation Only

Some investment advisors will work on an hourly consultation schedule. This means that while you will be managing your money they can make suggestions and give you advice that will help you avoid the worst pitfalls. This is often much cheaper than that 1% fee since you won’t have to meet with them regularly (about once or twice a year). While this means you’ll still be the one implementing the trades and keeping track of your money it’s a good way to feel like you’re not alone. If you’re confident you can manage your own money without getting lost then this is a good choice, but if you’re completely new to the financial markets you could still end up lost.



Posted in: Advice

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